Question

Compare operations of foreign exchange markets to domestic markets. Explain how foreign exchange rates, economic conditions, and the international business environment affect prices charged in foreign markets. Support your analysis with a current news source, such as electronic local newspapers, New York Times, International Business Times, Economic Times, or CNN News.

Answer 1

Marketing is defined as the set of activities which are undertaken by the companies to provide satisfaction to the customers through value addition and making good relations with them, to increase their brand value. It identifies and converts needs into products and services, so as to satisfy their wants. There are two types of marketing namely, domestic and international marketing. Domestic marketingis when commercialization of goods and services are limited to the home country only.

On the other hand, International marketing, as the name suggests, is the type of marketing which is stretched across several countries in the world, i.e. the marketing of products and services is done globally. In this article excerpt you can find the difference between domestic and international marketing in detail.

Domestic Marketing refers to the marketing activities employed on a national scale. Marketing strategies were undertaken to cater customers of a small area, generally within the local limits of a country. It serves and influences the customers of a specific country only.

Domestic Marketing enjoys a number of privileges like easy to access data, fewer communication barriers, deep knowledge about consumer demand, preferences and taste, knowledge about market trends, less competition, one set of economic, social & political issues, etc. However, due to the limited market size, the growth is also limited.

International Marketing is when the marketing practices are adopted to cater the global market. Normally, the companies start their business in the home country, after achieving the success they proceed their business to another level and become a transnational company, where they seek to enter in the market of several countries. So, the company must be known about the rules and regulations of that country.

International marketing enjoys no boundaries, keeping the focus on the worldwide customers. However, some disadvantages are also associated with it, like the challenges it faces on the path of expansion and globalisation. Some of which are socio-cultural differences, changes in foreign currency, language barriers, differences in buying habits of customers, setting and international price for the product and so on.

1. The activities of production, promotion, advertising, distribution, selling and customer satisfaction within one’s own country is known as Domestic marketing. International marketing is when the marketing activities are undertaken at the international level.
2. Domestic marketing caters a small area, whereas International marketing covers a large area.
3. In domestic marketing, there is less government influence as compared to the international marketing because the company has to deal with rules and regulations of numerous countries.
4. In domestic marketing, business operations are done in one country only. On the other hand, in international marketing, the business operations conducted in multiple countries.
5. The risk involved and challenges in case of international marketing are very high due to some factors like socio-cultural differences, exchange rates, setting an international price for the product and so on. The risk factor and challenges are comparatively less in the case of domestic marketing.
6. International marketing requires huge capital investment, but domestic marketing requires less investment for acquiring resources.

Currency exchange rates are quoted as relative values; the price of one currency is described in terms of another. For example, one U.S. dollar might be equal to 11 South African rand. In other words, an American business or person exchanging dollars for rand would buy 11 rand for every dollar sold, and a South African would buy $1 for every 11 rand sold.

These relative values are influenced by the demand for currency, which is in turn influenced by trade. If a country exports more than it imports, there is a high demand for its goods, and thus, for its currency. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value. In contrast, if a country imports more than it exports, there is relatively less demand for its currency, so prices should decline. In the case of currency, it depreciates or loses value.

Your international marketing of goods may be successful in western economies that have a similar economic structure to the United States, but it will fail in developing markets unless you make adjustments. You have to adapt your products to the local economies. A product you market as environmentally-friendly may not be relevant in a subsistence economy. A product that saves energy will not sell if energy is subsidized and inexpensive in the foreign market. You may offer the same products internationally as you do in the United States, but your global marketing has to change for your products to make economic sense in foreign economies.

Whether an international market is accessible to your company depends on whether you can offer your products at a competitive local price. International economic factors such as currency exchange rates, tariffs and shipping impact your costs and the prices of your goods. If the cost of offering your products in international markets is higher than that of locally-produced products, you may have to target luxury goods market segments. Sometimes mass-produced goods cost less than locally-made custom products, and your marketing strategy can price your products to achieve wide acceptance.

Carrying out production locally is one way to reduce costs and limit the influence of international economic factors on your operations. Instead of incurring costs through duties and transportation, you may be able to take advantage of lower production costs in the local economy with lower labor and facility expenses. Local production can impact your marketing by affecting both price and local acceptance. Marketing your products as locally-produced competitively-priced options can be an effective marketing strategy.

The international and local economic environments influence your channel marketing. If establishing a local presence is costly, you may opt for partnering with a local or international distributor who already has experience in the target market. For some markets, it makes economic sense to market your products via direct sales, either through local representatives or via online sales. Alternatively, a low-cost, open local economy may make it feasible to create your own local distribution network. The channel you choose for your marketing initiatives depends on the economics of delivering the goods to market and the local economic situation.